These were barred from circular trading by Sebi
Thirty-nine entities barred from stock markets by the Securities and Exchange Board of India (Sebi) last week for circular trading may also face inspection by the Ministry of Corporate Affairs (MCA) for possible anomalies in their balance sheets.
“We are considering inspect ing the books of these companies under Section 234 of the Companies Act, 1956, as we thought they caused huge losses to investors,” a senior MCA official said.
In the first stage, the probe into the allegations of circular trading may be done by the director of inspection and investigation in MCA.
If there is a prima facie case, it would then be referred to the Registrar of Companies (RoC) that can launch scrutiny under Section 234 of the Companies Act, which gives it the power to call for information or explanation from corporate entities.
MCA inspection could include ascertaining whether the 39 entities punished by Sebi were linked to each other through common directors, the official said.
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Circular trading refers to a fraudulent scheme where ‘sell’ orders are entered by a broker who knows about a certain numbers of ‘buy’ orders in advance.
The barred companies, including LGS Global, Spectacle Infotek, Well Pack Papers & Containers, Goldstone Technologies, and Gemstone Investments, belong to Pabari-Parikh and Walmiki-Shah Groups.
Sebi investigations, between 2008 and 2010, revealed there was a huge trading volume around these scrips with wide variations in values, causing loss to investors.
Sebi also directed stock exchanges to ensure the entities did not take fresh positions or increased their open positions.